Budget leader Alister Mackinnon yesterday issued a stark warning over Highland Council’s precarious financial position in a statement predicting a £5.1m overspend this year, almost twice what was projected at the same time last year.

With only around £8m of reserves in the council’s coffers, well below the minimum recommended by Audit Scotland, Mr Mackinnon said: “Urgent action is required now to address the situation and bring expenditure back under control by next March. This is an early warning, and we are determined to take the necessary corrective actions, in a business-like manner, recognising the seriousness of the situation.”

Mr Mackinnon ruled out redundancies except in the most extreme cases where there was no possibility of redeployment.

He said: “Every time someone retires or resigns we’ll re-evaluate their post. When a job comes up that there’s no need for, we will redeploy that person, although in the most remote rural areas, this might be difficult.”

Staff have been asked to take action now to avoid non-essential expenditure, and to consider the deferral of non-priority activity, he said.

Recruitment and overtime controls are to be stepped up, alongside a review of all agency appointments, such as drivers.

Mr Mackinnon emphasised that services for the most vulnerable would be protected.

Controls on travel expenditure were already in place with more and more meetings done by Business Skype, or videoconference, he said.

Almost half the projected overspend, around £2m, comes from this year’s winter maintenance.

Mr Mackinnon warned: “We also face the risk of another hard winter which would eat into our reserves, so early and decisive action to address the projected overspend is vital.”

He said: “We need not only to be prudent, but commercial, and generate income to avoid job losses and protect essential services. Staff are driving ideas on how to do this and we’re analysing them at the moment.”

He added: “Although we have a budget of nearly half a billion, we have considerable challenges, our rurality being one of them, delivering care at home for example, and not being allowed to rationalise our school estate. But it’s still a lot of money with room to make savings.”

Highland Council has complained bitterly about the Scottish Government’s refusal to settle local authority income for more than one year at a time.

Mr Mackinnon said: “It is unsettling. No business operates like that, and we have to be more business-like. We intend to bring forward a three year plan, based on estimates, to provide more certainty for our staff and communities. It’s a huge exercise involving all departments, meeting fortnightly.”

A Scottish Government spokesman said: “The facts are that Highland Council has received more money this year – not less – from the Scottish Government, despite UK Government cuts to our resource budget.

“The council will receive more than £487 million Scottish Government funding in 2018-19. This means that taken together with their decision to increase their council tax by 3% Highland Council has £17.1 million more available to support services this year compared to 2017-18.

“Future year local government finance settlements will be subject to negotiation with COSLA.”